Stock S Is Expected to Return 12 Percent in a Boom,9

Multiple Choice

Stock S is expected to return 12 percent in a boom,9 percent in a normal economy,and 2 percent in a recession.Stock T is expected to return 4 percent in a boom,6 percent in a normal economy,and 9 percent in a recession.The probability of a boom is 10 percent while the probability of a recession is 25 percent.What is the standard deviation of a portfolio which is comprised of $4,500 of Stock S and $3,000 of Stock T?

A) 1.4 percent
B) 1.9 percent
C) 2.6 percent
D) 5.7 percent
E) 7.2 percent